The Mortgage Bankers Association reported today that applications for home loans fell last week by the largest margin in six weeks. The industry group's market composite index decreased by 4.7% compared to the previous seven-day period. This marks the eighth time in nine weeks that the index has dropped. It is now off its May high by 53%.
In a downbeat sign for the housing market, last week's decline was led by a fall in purchase-money mortgages -- that is, home loans related to the purchase of a house as opposed to the refinancing of an existing mortgage. According to the MBA's data, which covers an estimated 75% of the mortgage market, the purchase-money index dropped by 5% on a sequential basis, though it remains 2.7% above the same week last year.
Meanwhile, refinance activity was not hit as hard. The MBA's refinance index dropped by 4% on a sequential basis and is now, thanks to the surge in interest rates over the last few months, 56% below the same week last year.
On the heels of this news, shares of the nation's largest homebuilders are trading lower. At the time of writing, D.R. Horton (NYSE:DHI) is down by 1.9%, Lennar (NYSE:LEN) by 1.8%, and PulteGroup (NYSE:PHM) by 1.8%. Suffice it to say, all of these companies rely on a robust mortgage market to fuel demand for new homes.